The Lost Opportunity of School Vouchers

The Lost Opportunity of School Vouchers
By: Rene Velez April 7, 2009


As American Citizens we have since the start of this country been afforded free public education. This education played a very important role in the development of our capitalist society although it has been anything but free. In just about every state the majority of the cost of a public school system is absorbed by real estate taxes. A taxing system that is levied base on the underlying value of your home and or business real estate. It does not matter whether you have children in school, or whether you are retired, in the end everyone picks up a piece of the tab. Although this may seem unfair I would suggest that everyone consider the cost of illiterate youth running around your community with no employable skills, and who eventually have families of their own and because of their lack of skills, they and their families, become to some extent or another wards of the state. A cost you will be responsible for. Now, the cost is not so high!


The United States – Socialist Republic of Education

Some of you may have come to realize that although we pride ourselves as a truly democratic nation, our schools system is more socialist than most will admit. We levy taxes on the real estate of the elderly, those without children and businesses as well as those who take the path of private and parochial schools, in order to provide education to the masses. I ask what could be more socialist? In this case I am not mocking the socialist nature of our educational system, however I do have some issues on whether it is effective and whether our system is just. Education needs to be made available to everyone. Education is by far the most effective way to overcome poverty, to solve basic life needs and to create an advanced society that is innovative and productive. Clearly, there are many even in this great country that would not have the means to a basic high school education were it not for public education. But is it the best? Do we sacrifice the notion of a free and democratic society, the right to choose how our children will be taught and what they are taught? In most states public education is under fire for not establishing high standards of education. Graduating students who are barely literate. Morals, ethics and values are not taught. The unfortunate truth is morals, values and ethics are not taught at home either. The administration of our public school system has taken a back seat to the politics of the day. So intertwined are the politics of our school system that often the governing councils don’t listen to the educational scholars who for many years have said we need to reform not only the schools system but methods of teaching. I dare to say we would be much better off separating academia from local and federal politics.

Insult to Injury

In many cases the public school options are so far off track that many parents have decided to make substantial economic sacrifices to “Double Pay” their way towards better education for their children. What alternatives do you have? Private Schools and Parochial Schools, are two options that require you to essentially “Double Pay” for your child’s education. I say “Double Pay” because you pay real estate taxes that support public schools, (which you do not use) and you pay “Full Price” tuition for your choice to produce an educated and productive citizen for this great nation. With any luck that student will also go on to college and will also have the formation of proper values, morals and ethics.

Our current tax code allows you the opportunity to deduct donations you make to qualified charitable organizations. The reason for this is simple. Congress has deemed the benefits charitable organizations provide the community and this country to be so great, you are allowed a deduction if you itemize on your tax return. I consider this very honorable. The benefits to our society are at least four times the billions of dollars donated every year. No government or business could provide the vast number of services that charitable organizations provide. Why? The labor is typically composed of volunteers who receive no pay at all! The insult is that you receive no benefit by producing a productive, educated citizen that is more likely than not to obtain a college education. That’s right there is no deduction for tuition paid for private schooling. Even if the only public education is a failing institution. The greatest, most democratic nation on earth, who claims to be the most productive and innovative of any other nation on earth has not been able to place a value on its most basic of all capitalist elements. The human element of an educated child! Clearly, congress and our politicians have it wrong and we as a free society have also failed to make them recognize this.

Vouchers Systems

The potential for improvement, through educational vouchers for those who choose and can afford to pay for private or parochial education, Pre-K to 12th grade, is significant. We will always need bright talented and motivated youth to lead this country in the future. Knowing this, why not create a voucher system that gives parents tax dollars to place your child in the school of your choice? Even if only a marginal rebate. We as a society need to understand that there are rather harsh consequences to this. For every dollar that is given back as some rebate to parents who’s children are in private or parochial schools there is one less dollar to fund existing public schools. This is a real threat to public school officials, teachers, bureaucrats, unions and of course to those children left with only public schools as an option. In full motion this, change in policy, tends to force issues that are already at play. Forces that would clearly indicate, our public schools system does not in many cases work. The biggest fear is that if you pull money away from public education it could eventually fail economically beyond what may be understood today. On the other hand, the reality is that if every parent that has a child placed in a private or parochial school placed their child in public schools, as is their right, the system would implode anyway. Few parents I have spoken to realize that by placing their children in private or parochial school under the “Double Pay” model, is in essence relieving or “subsidizing” the public school system. A school system that would otherwise have to come up with hundreds of millions of dollars more to find buildings, teachers, books, supplies lunches and a host of other expenses they are not currently incurring. In case you weren’t sufficiently insulted in my previous “Insult to Injury”, now is a good time to turn the other cheek and receive another.

Still vouchers deserve a great deal of merit. If you can come to terms with the fact our public schools system has already failed, then the next step is to look at alternatives to the consequences. This is what we call “looking reality in the face”.




What May Happen Under A Voucher System

(1) Many schools that are failing will be closed and resources would be concentrated into better schools.

(2) A smaller school system may allow the opportunity to focus more on fixing the core issues than on prolonging a failed system. There is no question that educational politics is in the way of a formal educational reform that will lead us into the 21st century. We need start doing different things to arrive at better results. Not everyone is college material, however we don’t have a single mind that should be wasted. Many technical positions and vocational programs can be put in place. At the high school level work and study programs can benefit those in poverty, reduce crime rates and still provide for productive citizenship.


(3) Charter Schools, essentially privately run schools funded by public tax dollars, will eventually become more common. These schools have shown tremendous promise. They typically have a very autonomous governance, so they are less likely to be influenced by politics. They tend to be more economically feasible and cheaper to run since they do not require the administrative layers that are very costly and are the norm in the public school sector. In essence more bang for every tuition dollar. They run like a business, not like a government. They typically have contracts that stipulate bonus dollars for performance. They have the ability to raise funds through charity. Parents can offer to subsidize certain programs. Some cater to certain vocational programs. In my opinion Charter schools are in fact the new generation of public schools.

(4) More parents may stretch that dollar and opt to place their kids in private or parochial schools. A real opportunity to strengthen the cultural and religious fabric of our society.

(5) Public Private School Ventures: This is a hybrid between a charter school and a private school. Essentially tuition is paid for by government, however because of demographics and other economic factors there may not be enough money to fund an entire school, parents would pay a small yearly tuition or pay for some school items such as supplies, books or provide volunteer services. This is a very new concept. At the heart of this system is to recruit parents to be a part of the educational system and essentially buy into education. I don’t know how many times I have heard public school teachers wish parents would attend PTA meetings. My feeling is that parents who pay have a vested interest in the success of the school, and there children.


Conclusion:

There are many challenges that are before us in education. We can not afford as a nation to relegate quality education solely to those who have financial resources to “Double Pay”. This only widens the gap in social class and weakens our political and economic place in the world. We as a society need to recognize that in many cases, public education has already failed. We need to adopt those systems, such as school vouchers, that reward citizens who are progressive about bringing about a better educated young adult. One who has a higher probability of competing in a global setting. We are at a turning point in basic education. We must start to think outside the box and recognize that no one solution will suffice. Variety and diversity in education is what will make this country a nation of nations. Our public school system was modeled at a time when the industrial revolution was in high gear. Our economy and the expectations placed on productive individuals have in fact changed. Yet, our educational system from Pre-K to 12th Grade as not reformed to a global standard. It may well be that our system of government, who oversees public education is no longer capable to deal with the diversity and complexity of an ever diversified public. However, the initiative to provide an education to everyone who is able and capable is still valid. Let’s find a way to break from the bondage of our past and find innovative ways to educate. We should not allow the divisive rhetoric of religion, separation of church and state to not fund parochial schools. Too much is at stake. Saying no to school vouchers is a lost opportunity to explore better models of education.

What Happened to Anti-Trust Law?

What Happened to Anti-Trust Law?
By: Rene Velez Mar. 18th, 2009

A closer look at the shear size of a company such as AIG and the impact on our national economy and its far reaching implications to our global economy make me wonder why congress would allow a company to get so big. By any account it is a monster that is feared by congress, the Fed and our secretary of the treasury. As I recall during my education in finance and accounting I do recall some laws that seem to imply limits to large corporations that had monopolies. It was not too long ago that ma-bell was broken up, Office Depot was not allowed to merge with Staples and Microsoft was charged with operating a monopoly. As it turns out no one is truly is looking out for the national economy in allowing AIG to become the apocalyptic, and financial nemesis that it has become. The Sherman Anti-Trust Act together with the Clayton Act do not seem to protect us from the sheer size and financial influence a large corporation or conglomerate can exert in a free market. Yet it’s devastating effects are upon us all as is evident in the historical bailout of AIG.

Sherman Anti-Trust and Clayton:

The following is an excerpt from WIKIPEDIA on Mar. 18th, 2009 and speaks to address the intention of these two well known laws.
In 1879, C. T. Dodd, an attorney for the Standard Oil Company of Ohio, devised a new type of trust agreement to overcome Ohio state prohibitions against corporations owning stock in other corporations. A trust is a centuries old form of a contract whereby one party entrusts their property to a second party. The property is then used to benefit the first party. In a corporate trust, the various corporations assign their stock to a board of trustees. The trust then issues trust certificates to the stockholders. They receive the financial benefits, while the board of trustees maintain operational control. By consolidating control of most companies in an industry under one controlling board, the industry is essentially monopolized.[7]
Around the world, what U.S. lawmakers and attorneys call "Antitrust" is more commonly known as "competition law." The purpose of the act was to oppose the combination of entities that could potentially harm competition, such as monopolies or cartels. Its reference to trusts today is anachronism. At the time of its passage, the trust was synonymous with monopolistic practice, because the trust was a popular way for monopolists to hold their businesses, and a way for cartel participants to create enforceable agreements.[8].
The Sherman Act was not specifically intended to prevent the dominance of an industry by a specific company, despite misconceptions to the contrary. According to Senator George Hoar, an author of the bill, any company that "got the whole business because nobody could do it as well as he could" would not be in violation of the act. The law attempts to prevent the artificial raising of prices by restriction of trade or supply.[9] In other words, innocent monopoly, or monopoly achieved solely by merit, is perfectly legal, but acts by a monopolist to artificially preserve his status, or nefarious dealings to create a monopoly, are not.

Our Regulatory Framework is Outdated

The current economic crisis clearly is reflecting that our regulatory agencies are far behind and in many cases incapable of dealing with the economic structure of today’s large corporations. We can now see with certainty that we have not engineered the controls and safeguards to manage business in the 21st century. I continue to think free markets do work, but not without due caution and controls to prevent catastrophic failures that bring down a national economy. Scholars will look back at this moment in history and will learn much by our failures. Systemic control are in fact very important, the real question is how do you do that and not stifle innovation, creativity and the growth of an economy. We must find a balance in how to do this and we have to do it quickly. A completely unregulated economic engine is like building a race car with no brakes simply because you believe that the purpose of a race car is to go fast and nothing should slow it down. Any aeronautical engineer would tell you, you need to have landing gear on an airplane even though they serve no purpose in flight. Why then would anyone argue that controls and safeguards stifle economic growth. It is amazing to ponder on how creative and innovative mankind is. This is true in science as it is in business. However, we have a propensity to derail ourselves. Our sense of curiosity ability to innovate and experiment and to exert our will outside of the envelope is a dangerous thing. Systems, controls and regulation should not be of the nature to hinder our progression but rather to make us stop and think of the consequences of our actions.

In this economic crisis we allowed our economy to venture onto the edge of a cliff and we are in effect balancing on the center of gravity.


The Implications to Global Economics

International trade and commerce has served this country well. It has also created stability and economic opportunity for all who trade with us. International trade and commerce is bringing many emerging markets to the forefront of world politics and economic opportunity. Look at China, India and Brazil. This venture is feeding the hungry, clothing the poor, educating the masses and in sum improving the human condition for many countries.

As our global economy continues to evolve we should be very concerned about how we go about creating interdependent relationships on the global level. We must understand the repercussions of failed business, failed economies and how debt and other financial structures work and are supported. Why do I mention this? We need to be extremely fearful of what could precipitate from forming relationships with countries who’s banking system, economic system and monetary policy is severely flawed. Where a business failure in one country is marginalized, for the most part, to its boundaries, in an entire country economic failure, to the extent of what we face today in the U.S. could mean a holocaust, political unrest and even war.

Just as the U.S. has tried to be a responsible country in creating peace and avoiding conflict that saves lives we now have the obligation to make sure that no country could possibly fail economically to the point where all chaos breaks out and we are unprepared to address these issues. We must be preemptive.

Surely, we have only a limited control as to what we can have sovereign countries do, but we must be risk averse. The propensity and desire of other countries to emulate western economic power on a framework that is not suited to support that activity will in fact have profound effects throughout the world. Economic and political instability are key ingredients to war and political, cultural and religious ideology that is contrary to everyone’s desire for world peace and democracy. That being said I doubt there are many in congress (if any) that have a full grasp of the consequences and what are the drivers to these events. Economics is tricky and complicated to master.


Trends to the Future

There is much talk in the accounting profession to start to merge the standards of accounting into an international standard. In effect we will abandon historical cost accounting and adopt fair market value accounting. Many a seasoned accountant thinks this is a huge mistake. Adding fuel to the fire is the continued interest of merging foreign stock exchanges and in forming business combinations of capital markets in order to support multinational business activity. As emerging markets continue to expand and grow we will in effect need access to capital from around the world. Although, I feel that diversification of investment is a good idea, we must be extremely cautious of the inequities, abuses and the confusion of information that will be inherent in the complications of different economic climates, political risks, accounting rules and methods, regulatory systems controls and laws, competitive laws and a host of other issues of a modern day economy.

Does our president, our congress, our regulatory agencies have the ability to judge and limit the associated risks? The answer is a resounding NO!. No one is. No one company has their hands completely around this. In fact many are venturing into uncharted waters and learning as they go along. Many are making history in their own right and even ignoring the recommendations from experts in various disciplines. Why? Because of greed. , because of need.

The desire of countries, companies and governments to seize opportunity for greater wealth and for the maintenance of market share could well be the undoing of what greater good democracy and capitalism may offer. As the greatest capitalist country in the world we need to be cognizant that wherever we have influence, we will be blamed for the downfalls and potentially devastating effects not only of economic cycles but of failures of sovereign economies. History already shows us the Unites States has taken blame for many well intentioned efforts to help governments, and its people.

With the failure of so many large businesses in this economic downturn, do we as a nation abdicate our foreign policy and national responsibility to large multinational corporations? We need to start realizing that each U.S. company that ventures to a foreign country to do business is in effect an economic ambassador and by shear economic might and political influence is at the forefront of foreign policy. Congress, regulatory agencies and the like come along for the ride after the fact.

Congress Is Failing America!

Congress is Failing America!
By: Rene Velez Mar. 17, 2009

In some of my commentaries I have often cited the majority of America’s congressmen are lawyers by profession. Although I have been known from time to time to make folly of how lawyers have a funny way of making simple matters a complicated bureaucracy, I could not of imagined that they were as foolish as they are collectively. At minimum I would have thought there was a sense of safety in numbers, because someone eventually comes out and says……”wait a minute this doesn’t seem right!. Our congress has been fed the hook line and sinker, they have been hood winked, hog tied, extorted, deceived, lied to and they don’t even know it. These are the people we have in a position of power and trust of our money and government. I am in disbelief and if it were not for the seriousness of the matter I would think it’s a comedy of absolute stupidity. I need to add, I am not alone on this! I think what I say here most of America is beginning to understand.

The World As It Is For You and Me

If you or I (the typical average American) is having a hard time and we find ourselves having to cover for business mistakes, losses and a poor economy, we could try to find investors and or banks to give us financial assistance. If we were in the position of AIG, if somehow we could possibly convince a bank to loan us $165 billion dollars, there would not be a bank or investor in the country worth their weight in salt, that would give us money unless there was a contract drawn up. (Of course this is very hypothetical as no one would lend us or invest in a $165 billion dollar failure) But, for this illustration the terms and conditions would say things like, no excessive compensation to owners and officers, no distributions unless approved by lender, collateral of all personal holdings and even those of your children would be at risk, a guarantor would be required, like your rich grandfather or someone who had some financial weight. The stipulations for this kind of highly speculative loan would be long and extracting of the company and its owners. You probably could not buy a company lunch unless the lender approved it. Not only is this typical for lenders to do, but regulatory agencies would require prudent legal documents for such a loan and just about any newly minted attorney would tell you….you should have that agreement in writing, recorded and all the like legal procedures complied with. The truth is we would not likely get this type of loan unless we were holding some very special wild card that would amount to a miracle card. Something like an anti-aging drug, or the cure to all known diseases. Not even a cure for cancer would warrant a $165 billion dollar nailout. Oops, bailout.

So the question is , why didn’t congress create a better loan term document for AIG? Was there perhaps a shortage of lawyers? Did no one realize that there was an expectation of performance, repayment, control and transparency and accountability. These concepts of negotiated terms are so basic to a financial transaction that if congress has not properly protected US taxpayers, I dare say it is malpractice.

The Keys to The US Treasury

I know there is some document out there with terms and all, but it would seem that whatever the legal jargon on that document is the net effect appears to be, congress gave AIG the keys to the US Treasury and has told AIG, “write yourself a check and we will square it out later.” When I was a young boy visiting my relatives in Puerto Rico, I came to the realization, the small town I lived in was indeed very small and I was by no means living in Brooklyn. On a given day my cousins and some friends decided to go on a camping adventure through the cane fields and farms in the local area. So we gathered all the equipment and I was assigned the task of going to the local “Bodega” (a small country store) to secure basic provisions. This amounted to bread, butter some hard salami and other goodies. The only issue is I had no money. My cousin said, “don’t worry just go in there get the stuff and Miguel will put it on our list.” I didn’t know who Miguel was but asked, hey how does Miguel know who I am. My cousin replied, “ you are grandpas’ grandson from New York, everybody knows who you are. Indeed people I never met and that were not related to me knew who I was in town, knew I was from New York, thought very highly of my New York lifestyle, and even called me by my first name. Surely, coming from New York that was novel but truly I never gave it too much thought. I was not brought up to think I was more special than anyone although in retrospect, I was privileged among even my immediate relatives. I went as instructed to the Bodega, was kindly greeted at the door ordered my supplies and when I was finished, I was never asked to pay. Miguel simply said to say hello to my Dad for him and wrote down our purchase in a “school composition book” and told me to have a great day! That was they way things were done in Puerto Rico in that day and age and in many Latin American countries round the world. Today, I realize I was given that honor because I was wealthy compared to many in the town. I was also very well known because of my grandfather, who was well liked and respected in the community. I was indeed privileged to have doors opened to me by people who had much less than I. Who respected accomplishments by my grandfather and father and therefore looked kindly to their children. These people knew my grandfather would not abuse his credit or repayment obligation even though my grandfather never authorized or called ahead to say, let the kids put it on my tab. The only way that happens is when you have a tight community.

Such is the case in Washington. AIG has close ties to Washington and their power and influence must have been strong enough to bypass common sense and the ordinary course of how things typically get done so that congress simply wrote down $165 billion in loans in their congressional “school composition book”. Of course it doesn’t hurt when President Bush, the Federal Reserve Chairman Bernanke and Treasury Secretary Paulson have committed themselves and the nation with the political language of “Financial Crisis”!. All, on the eve of the presidential elections. That’s the grease that makes things move quickly in D.C.

Bankruptcy By Default

When I read that congress can not do anything, about executive bonuses paid out of taxpayer bailout funds, because those agreements were already in place and that contracts can not be voided I say; “Non Sense!”. That’s the most ridiculous thing I have ever heard. Let’s have a trial by jury and see if you can find a diversified group of Americans that will agree to not voiding those contracts. Why didn’t congress force AIG to file bankruptcy in order to get the bailout? Why didn’t congress invoke the laws of bankruptcy as a condition to a government bailout? Was there not a single lawyer qualified in congress the day AIG was given the keys to the United Sates Treasury? Let’s face it this is bankruptcy by default. When the only alternative is for you to seek a government bailout with taxpayer money the jig is up. You are by all accounts more than bankrupt, you are indebted to taxpayers and the United States of America. In the case of bankruptcy, the trustee has enormous powers. They can force the return of money paid out by a company to anyone or any company. Enforce contracts and make others void. They can dispose of assets, abandon them etc. They have all kinds of tools in their arsenal of laws to fix things. Of course somehow AIG did not follow what you or I would have to do. They just went to their rich “Uncle Sam” and asked them for help. After all, they are a credible, pilar of the financial community and a model business failure to boot. You know that’s worth about $165 billion dollars. When you’re failure is that big you get special dispensation in America. The fact is they declared bankruptcy and in deed filed a petition to the United Stated Government and its taxpayers and congress does have the means to void contracts they deem unjust. Salary or not. Now can we find a decent lawyer in our congress to fight for the American public? Anyone? Let’s not forget the credibility of congress and this great nation is at stake!


True Concern for our Future

I have but the utmost belief that this country will regain better days, but it is going to cost this country dearly. In addition to regaining ground we must do a multitude of things correctly simultaneously. Therein lies my fears. Our track record in allowing this crisis to happen and to respond to it leaves me and many Americans to be gravely concerned about our nation’s ability to handle these types of crisis without further sustained injury to the economic lives of our citizens. Our democracy as great as it is, is not used to or prepared for this modus operandi. I do not believe any members of congress have ever faced this type of crisis management and many are disconnected to the realities of the vast majority of our population. Many of our citizens will continue to get hurt in this arena and there is no safety net in place. The lacking leadership in this country and many of the economic inequities that has been coming forward for the past 30 years seem to be quickly coming to a head as the economy continues to contract. I know this seems alarmist. It really is not my style.

Plan for Action / Plan For Change

Congress needs to create a special committee to study analyze and become a special economic and crisis management team to make sure taxpayer money, the presidents economic recovery plan and a multitude of national priorities are carried out efficiently and effectively. The concept of a House and Senate bi-partisan legislative process conducting business as usual simply is not enough or efficient. Like many business ventures streamlining and fast tracking plans of action need to be implemented. In some ways the logistics of warfare could be put to good use in the current economic climate and in carrying out national initiatives. I realize as a democracy we deplore this concept. As much as I hate to admit it, we could learn from how the Chinese have managed to combine political ideology with capitalism.

I would not think of changing our form of government. My comments are geared towards changing how we do things not why we do things. We have to change how we do things in order to arrive at a different outcome. I don’t think in our country’s case it is fair to look back at history and apply exactly the same tactics that have worked in the past. The world, our position in it and the pace at which our global economies react are much different today than they were in 1933 or 1974. We need to recognize this and adapt. Congress and our president needs to somehow recognize that we need to change the business of politics if we are to be able to sustain a competitive edge. If we are to survive as a leader of nations.

The Faith in Your Politcs

The Faith In Your Politics
By: Rene Velez March 9th, 2009


It seems to me that it has come to the point when we have to talk politics and faith, all in one breath. Not that this should be so surprising when, you consider that the United States, the great nation that it is, was formed over two hundred years ago in large part by many seeking religious freedom, among other things. As part of this pursuit, every political, legal and business device was employed as a means to this end. The end did come and this nation became a nation where religious tolerance became not only a way of life but also a way of politics. Our constitution protects individual’s religious beliefs not only by means of common law but also as part of our constitution.

Having said that when did it become popular or a matter of proper form that no politician should utter a word as to their convictions of faith? Somehow from the beginning of when this country was formed through the late sixties it was a safer bet to stay silent, or at least not to stir the wine, by mixing politics and religion. I think somewhere their was an unwritten rule that said; be sterile if you want to get the vote of the masses. Yet, within I would say, (I am guessing) the last 30 years politics and religion seems to be at the forefront of many a campaign. What goes on here?

I suppose that part of the issue is that religious organizations have a great deal of political clout in terms of money and votes. In addition I believe that, the poor judgments and outcomes of corporate America together with the sins of politics (no punt intended) looks towards the values and morals of faith to lend a guiding hand towards, ethics and values. Some call this the right and wrong in terms of values or the left or right in terms of politics.

God Is With You

As an observer, I read stories in the press regarding conflicts about some peoples religious freedoms over the freedoms of another. For example; should a menorah be placed at a community center if the community is mostly Christian? Is this offensive? Or should a Christmas tree and Santa Clause be erected in a ‘round about’, in front of a Jewish temple? Or perhaps , most perplexing should a sculpture of the ten commandments be in display in a county courthouse? The latter has a peculiar twist in that our legal system tends to borrow a great deal from religion as a whole. We swear in witnesses on a bible. Our basic law of torts is derived in part by the very same commandments. We utter the words “God Bless America” in full glory and most people do not raise an eyebrow. The President of the United States is sworn in with is right hand on a bible. Our money says “In God We Trust”. Curiously, now that our banking system is in intensive care, we trust less in our banks, we are cautious with anything congress does and we despise corporate America for its evil ways. Right about now, God and the moral values of religion have my attention! God help my 401K, and deliver us from all evils!

The fact of the matter is that religion is in all forms of government and politics. We never really managed to separate church and state. Technically, churches and other religious organizations are not required to file or register for tax exempt status. However, they are obligated to follow the same tax laws that apply to other tax exempt organizations. Something the IRS is now interested in since the mega churches seemed to grow overnight into large financial dynasties. Some of what they do is in fact taxable. Or from a political point of view, or twist, their vast numbers and economic and political might make them more visible.

A Calling for a Moral Compass

Strangely enough religion is in politics today and politicians are less fearful although very calculated in how they embrace religion and politics together. Why? I think America, if not the world, has a calling for values and morals in how our country is governed and how equitable representation is made possible by political candidates. The desire for a moral compass is well founded and I suspect that it will endure for some time to come. I fear though that any strict adherence or association with any religious denomination is flawed at best. In the end the tensions, conflicts and extreme positions between the idealism of any religion is a greater liability than it is a resource. I suspect that in the end voters will get tired of ‘converted politicians’ and some will burn in hell for their choices. However, this speaks volumes for the dire need for straight non-biased ethics of elected officials. In the end people don’t care what religion the political leader favors, or sympathizes, only that they carry out there roles in a capable and well informed manner. Our political moral compass will not work solely through religion, it would work better through sterile intellect and through transparency and accountability, tempered with the sense of humanity of and for the voting public. What people want are smart politicians that are knowledgeable and well rounded, who act in the furtherance of our society and not on their political futures or for the interests of big money. If my suspicions are correct politics in this country will have to change and nothing is more of a catalyst to change than a bad economy and proof positive of the shortcomings of a congress who in large part could well be proven as incapable.

Ethics and Values as Part of College Education

I have in the past made mention of the urgent need to teach ethics and values as part of business schools. As a parent raising two kids, I have often thought that ethics, values and morals should come from the home. But in an era when a new generation of have-nots, that are coming from less than educated and well rounded social circles, are in fact meeting the challenge to work their way towards a college education, we must face the fact that many have not known the best of ethics and morals from their upbringing. I don’t mean this to be a criticism in any way. What I am trying to say is that we must embrace the disadvantaged, who strive to better themselves by means of an education, and have not been privy to the models of moral and ethical values to acquire those skills. If these models are not part of their upbringing then they should be, as part of their continued education. I would also like to mention, what I say here is not limited to the disadvantaged. My personal experience in knowing many a wealthy and advantaged contemporaries, who have it all, yet lack the very same models of ethics and morals. In some cases these members of our society could be worse. Why? Because no one typically denies them access and because they grow up with a mentality of entitlement through association of money and influence. In other words, they are spoiled brats. Yes, the lack of ethics and morals is an equal opportunity vise. People without ethics and morals have no social class. (how appropriate in that last sentence has two meanings, (a) They have no class, (b) and, there is no difference between social classes).

We are in fact a divided nation on Sunday! We deny children the right to public prayer at our schools and yet we expect them to have proper values and morals. This is not to say I don’t see the point of argument related to religious freedom in schools. I wouldn’t know how to draw those boundaries of rights. But, I suspect it would look like a cross between Picasso cubism and the those melted images on a Salvadore Dali. (I really don’t know how anyone can draw up denominational boundaries and be faire) I think the best way to teach ethics and morals to our children and in our colleges and universities is simply to teach it in a sterile and non denominational context. There is a right and a wrong. This is basic. You don’t need religion for that. Where it gets complex, we need to learn to analyze. In the end we will all make mistakes, but if we must, then let’s make the mistake that benefits society as a whole and hurts society the least. There is a way to teach this, although I realize it is not easy, and somewhat philosophical.

I leave you with this one sentence which I remember and try to follow in my personal and professional life. It is in fact, I think, an admission that life is not perfect and that we often face difficult choices and that often ethics and morals are not popular, but try we must even when logic fails us and the odds are not in our favor. :

“The most difficult thing to do in life, is to do the right thing!, Even when no one expects us to do the right thing and when no one is doing the right thing, and when no one wants to do the right thing for you.”

God Bless You!, Have Faith.

It's Middle America Stupid!

It’s Middle America Stupid!
By: Rene Velez Feb. 19th, 2009


Overtime I have come to realize that all of us have to some extent a disconnect on many matters. I have one when it comes to the Hip Hop fashions today’s kids wear. I just do not see the glamour or why its “cool” to wear pants that are falling off your waist. You can’t even walk down the street without your pants falling off, much less run for the bus. Why is it that making people look at your underwear as your pants hang on the shelf of your buttocks cute, or cool. If you’re going to do that hey, just cut out the patches of cloth and let the cheeks hang out altogether. At least the pants will fit. You know there was a movie made about a designer who did that when designer jeans were the fashion.

I realize some of this is generational. When I was a teen bell bottoms were in. Man, I would not be caught dead wearing straight leg pants. The bigger the bells the cooler those pants were. But at least I wasn’t baring my anatomy. I confess, my parents had the same expression on their faces as I do now about Hip Hop fashion.


Today’s Major Economic Disconnect

As I look at all these bailouts and the focus on American big business, the more I see that our leaders truly have a disconnect about the core of Americas economic engine. To paraphrase a Clintonite expression, “It’s Middle America Stupid”! I well realize the importance of our banking system, of our automotive industry, of capital liquidity. I realize the profound ripple effects that these bailouts and government programs have in terms of the potential positive ripple effects throughout our economy. However, I also see clearly that our government does not understand, nor do they seem to know how to reach the innovative powerhouse of middle class America and the multitude of small businesses that make up a significant portion of our economy. It’s Americas middle class families that make up a significant portion of our national economy, It’s the innovation and super-efficient small businesses that have created real value in an economy where manufacturing and many industrial jobs have gone to other countries. For all the money that you may put into American big business, a large part of that will wind up spent not in our country but to overseas companies that manufacture the component parts, if not the whole product, at cheaper labor rates than is available here in the states. My feeling is that a bigger bang for the buck can be achieved by investing in the small companies that manufacture products and provide services hear in the states than to Americas big businesses. It’s these smaller scale companies that manufacture just in time components, or odd lots, or special order items, or provide valuable hands on service, that make their cost affordable and effective compared to large corporations that can only exist through economies of scale and by outsourcing production to other countries with cheap labor.

The Tie in to the Disconnect Factor

So you might ask, why money doesn’t flow to these small and mid sized companies? I should make note that when I speak of small and midsized companies I am talking about companies with 10 to 200 employees with revenues of between $5 and $25 million dollars. Although many could be called small that are in the $100 million and under. I think there are several reasons. One thing that comes to mind is that these companies have small budgets. They exist and make money because they are generally private companies (non public companies) who’s owners earn a salary and make a living but may not have much left after all operating expenses. As a consequence they do not have lobbyist and political activists working for them. They are under the radar. These companies have small voices in terms of making political waves for the political leaders who oversee their geographic region. So to the extent their inequities do not receive any response, the likelihood that an elected official may face a negative nudge on votes come re-election is a minor risk for elected officials. Of course many elected officials seek out and do have members on their staff that assist them in attracting the largest amount of support for any favors that they may be able to dole out. You can well say that it’s a way of buying votes. Our political leaders are more inclined to be sensitive towards big business and to take votes and positions in their favor because of their campaign contribution and how they can swing votes than they are for small middle American and typically non public companies. So there is a redundant disconnect factor towards small business. This disconnect comes from the limited resources of the business and from elected officials lack of interest for small to medium sized businesses.

The Economy of Scale in a Bailout


Another issue with regards to bailing out Middle America is the cost. From a business perspective most people are not aware of the billions of dollars that are spent on marketing and corporate intelligence of figuring out markets, market niche’s or even what type of gadget a consumer would purchase at say Best Buy. In fact they even know that a certain color of packing is more attractive than another depending on whether the buyer is likely to be a man or a woman.

The potential cost of figuring out which small business is worthy of a bailout or an injection of capital is enormous. In fact so much so that it generally precludes the governments ability to approach a bailout to this sector of the economy. Wallstreet, venture capitalist and private equity firms spend billions of dollars in a given year simply to find, analyze and structure financing for small to medium sized businesses. This process is so involved that even when done correctly, even spending large sums of money and employing MBA’s, attorney’s, accountants and a host of other professionals there are many failures or at best low returns to make the effort not viable. To think or suggest the government could potentially take on this task and do it better than the number of firms that do this professionally is for the most part foolish.

In order for the government to address the economic downturn on the scale that is currently the case, the best and least costly not to mention the fastest way to institute programs and policy is by starting at the top of the food chain. So big business, with lobbyist and the political influence will and do have an upper hand to being bailed out despite their sins. Not that I think this is at all fair however, it may be the best our government is geared to do.


Conclusion

This situation and the inequity of government to be for the people speaks much towards how we are trying to resolve 21st century issues using 19th and 20th century strategies. At no time in the history of the United States has there existed such a mass of economic power that has been so important towards achieving the innovative and economic objectives of our nation as there are today via small to mid sized businesses. And yet government fails to be able to represent or to harness the great potential of this vital sector of our economy. Obama won the election because he represented change and everyone wants that change. Everyone knows change is needed. But how to come about that change still eludes us. In our current condition I don’t expect that this problem will be fixed. It is more likely that small to mid sized businesses will address and fix there own problems than government coming to their aid any time soon.

Why Aren't CPA's Part of the Economic Solution?

Why Aren’t CPA’s Part of the Economic Solution?
By: Rene Velez Feb 10th, 2009


The country is a buzz about the economic downturn of one of the greatest capitalist societies in the world. People’s confidence in the Corporate world is by recent accounts at an all time low. Government credibility and its effectiveness is in doubt. Despite our congress’ ability to bring about a stimulus package to our economic conundrum by pumping money into the system, their efforts are wrought with a vision of waste, lack of knowledge and leadership and of prudent exercise of judgment. We the people have made a direct connection with the influence and power of big business and that of the associated strings attached to our political leadership. The money has gone to the wealthy despite the dire straights of the common citizen. To add insult to injury, reports of corporations conferring dynastic compensation packages to executives, purchasing corporate jets and travel and entertainment junkets to luxury destinations leaves nothing less than a bitter pill in the mouths of Middle American families.

In Iran, fanatical Muslims are chanting death to America, and rejoice on our economic hard times. Shameful, especially in that we have in large part brought this recession upon ourselves through capitalistic greed. Even our allies look to us for a solution and have spoken out against unregulated and egregious capitalism.

Psychological Economics

To a degree any potential solution or combination of solutions must involve a mind altering jolt, to snap us out of the pessimism that prevails in today’s markets. Besides sound economic policy and true leadership nothing, could create the psychological catalyst to stimulate confidence and a renewed economy as the metrics of transparency. This economic situation requires the skillful salesmanship of a change agent that can back his/her rhetoric with proof by the numbers. I dare to say, nothing short of this will bring us out of the economic tailspin we are seeing. In the end the solution to any turnaround requires all involved to buy into the plan and become part of the solution.

To this end the accounting profession should be at the forefront of offering the systems, and metrics to show the American people and the world how well or badly, the government is performing on any taxpayer money it uses to leverage us out of this hole. The country needs to see, how many banks are saved, how many jobs are rescued, how many jobs are brought back in line, who is making money, what industries are being benefited, how much money is being put into service, how is the money being placed and who owns those companies that are getting the money. How much is each state, city and local government getting, what is the amount invested today and how will that help the state, city and the citizens into the future. Can a return on investment be calculated. What thought process and qualifying factors are being used to award government contracts and funds. No profession is better able to analyze, record, interpret and report these findings than the accounting profession. In a congress where some 90% of its members are attorneys, who may be well endowed in the nature of politics and the law, few understand accountability and how to present it in a fair manor. This is, in my opinion a major flaw to the American political system.



The Sidelined Profession of Accounting

I have for many years been very critical of how the accounting profession portrays the value they render to our great nation. We as a profession have failed to educate the average person of what we do and what our responsibility is to the public, even though “public” is the middle name of our designation. We have failed to take on congress and to gain our rightful place as watchdog of government spending. While we clearly perform many services, we do report many abuses, we do know the ins and outs of the inequities of government, we are hog tied and gagged by the power and influence of Corporate America and their partners in waste and deceit, our very own elected officials. We have a Government Accountability Office (GAO) that has a role to supervise, oversee, evaluate, establish rules and systems and to report its findings to all about government activities. Yet it is essentially powerless and toothless in its ability to enforce and enact change on those it reports on. The accounting profession has direct ties to the Securities and Exchange Commission (SEC) and is subject to the promulgated laws and rules when it performs audits of public companies, yet we lack the power and authority to command changes that would safe guard wealth and the economic security of this spectacular of all capitalist nations. Although we do by and large add great value to the capitalist system by fair and standardized reporting of those companies that trade in our capital markets, as well as on government activity, we are leashed to the ministerial tasks of our profession as opposed to establishing the forum for transparency and for internal controls that make for a better capitalistic system and democracy.

The theory of Laissez faire when implemented has created a glass wall to the accounting profession in that no one wants a meddling professional accountant putting obstacles and questioning the free market forces and the flow of capital. Certainly, many know that we are not well liked when we come calling for records and explanations during an audit. But asking the tough questions with a trained mind leaning towards skepticism is in fact, what brings about value to our economy as a whole. Yet, we have a professional obligation to a certain extent be regulators with a commanding authority. By no means should the profession interfere, but we should have, a commanding voice that has the power to compel investigations and analysis of industries and trends. This is part of our implied role as watchdog. We also need to have authority with teeth to bite back when abuses are demonstrated. To bring about legal action or law enforcement when it is demonstrated and reasonably understood that there is public risk in excess of reasonable reward. Essentially this is the “whistle blower” laws on steroids.

Think of what a difference that would of made in the banking industry and in having an opportunity to evaluate removal of the Glass-Steagall Act in light of today’s economic demise of both our banking system and our investment sectors. Think of the role a more authoritative accounting profession could of played in the analysis of overleveraged banks and in evaluating the lending process and the risk shifting of high risk mortgage pools.

The profession is so poorly weighted in its importance to twenty first century economics that we are doing the great capitalist society a great deal of harm. Here too is an example of a profession that has failed to evolve from the concepts of the industrial revolution to the needs our nation faces as a global economic power with long reaching implications for American interest throughout the world. If you don’t think so read the press these days and see how many countries blame the U.S. for shameful capitalist conduct.

The Tools vs. The System

By and large the theory, tools, metrics the required understanding to all those disciplines that make our economy work are there. What is lacking is the independent, funded working system and framework to oversee, analyze and debate and report issues in a master framework that strives to bring about effectiveness and efficiency of our capitalistic society and our global economic influence.

What the United States needs is a United States Economic Development Board of Governors that takes on the role of watchdog, information gathering and analysis of fundamental economic issues and promulgates required legislative initiatives by elected officials. These promulgated initiatives shall have the following requirements:

(1) Promote economic stability.
(2) Make for efficient capital markets.
(3) Provide for efficient and effective banking.
(4) Provide for fair and balanced international trade.
(5) Create systems and controls and reporting for a transparent government.
(6) Create public private partnerships for innovation and the improvement and development of the country’s infrastructure.
(7) Create an effective and efficient government spending system
(8) All promulgated initiatives to legislators should have clear and obtainable times frames for any required laws, bills and other executive orders. It shall also impose strict time frames for completion of the tasks and the spending involved.
(9) Create a system for national healthcare, funded by corporations and government.
(10) Create a system for a national retirement system funded by corporations, individuals and government.
(11) Create a system that allows federal, state and local tax credits for qualified volunteer services rendered by individuals and corporations.

I am sure there are more critical items we could add however, in essence we need to be able to address core issues that further our social and economic interests in order to maintain our economic well being.


The Success of Autocracies in the 21st Century


Two notable authors Fareed Zakkaria and Robert Kagan in their books “The Post American World” and in “The Return of History”, respectively, make brilliant commentaries of the rise of Autocratic governments such as China and Russia. These governments are a far cry from what our government is, what it will ever be, yet they have had great success in developing their economic might with dictatorship style of governess.

Not that I cater to this form of government, yet as of late I see some sense in the current talk of U.S. nationalization of industries. Of course only the current economic situation brings mention of this, worthy of presentation for a great democracy like the U.S. What I do think is the key driver to their economic success is not the form of government at all. It’s that their form of government brings about strict initiatives that are accomplished in record times. That concerted efforts and in effect prime directives initiated at the top, are acted upon and brought to fruition in Stalin type fashion is very admirable and deserves mention. At the most innovative companies this is a key form of governess. Our liberal democracy is expensive, wasteful, time consuming and generally ineffective and adversarial towards addressing social and economic issues in today’s 21st century global climate. To say this in other terms; our government can not and is not built for business. Every time we try we wind up with $10,000 coffee pots and $100,000 toilets. We need to find the way to incorporate the autocratic decision making and initiative based methods to steer social and economic based policy into our democratic way of government. We need to isolate our legislative process to how best to pass the laws required to manage our country and leave the initiatives, measurement and evaluation from concept to implementation to an independent body that injects and mandates the important drivers into our government.

With regards to autocracies, the fact of course that their government will not succeed because they are mistrusted and mal aligned to the interests of other countries is a topic of political struggle not one of economic benefit. I don’t agree with dictatorships yet we do and should find ways to co-exist with all sovereign nations.


Conclusion

For years we have made fancy talk about bringing business based approaches to government. That was great talk then. Today in light of the capitalistic greed and fiasco that surrounds us I am not too sure we want business in our government. But more to the point business ventures in government will never work because the focus and goal of our elected officials is skewed and opposed to the better interest of our nation. An initiative driven government in a democratic structure driven by an independent body as the way to "fast track" critical reforms is something we need to discuss and the accounting profession’s skill set together with an existing value system of honesty and integrity could be a powerful force in moving this country in the right direction. The question is who among us has the fortitude and desire to venture into such waters. Maybe, our new president should consider this structure and be ring master.

The U.S. Emperor Has No Clothes!

The U.S. Emperor Has No Clothes!
(By: Rene Velez Nov. 10th, 2008)

Congratulations! We The People have cast our vote and one candidate has won a vast majority of the votes. Barack Obama is our president elect! A historic moment by all accounts. What can I say? I am speechless. Moments like these are best savored and engrained into memory as a lifetime experience. I have on this blog expressed my concerns about Mr. Obama, but I wish him well and as a citizen will stand behind him. Or at least for as long as it works. Such is politics.

I am particularly proud of this great nation. I know that this race was not supposed to be about race. But, I am not one to stay quite when the emperor has no clothes. Hey, what do ya know….he’s an African American! My fellow countrymen have wisely seen beyond race. American democracy is suddenly just a bit more genuine and legitimate. Somehow, a vote for Obama has made us a just and better example of democracy, freedom and liberty. God bless us all!


A New Face on Race

Just as Obama has won a national election, I am both fearful and excited about what it all means. After all, this is an experiment of sorts. I fear that politics may deal a heavy blow to race or, it may help us be more harmonious or homogenious. If Obama does well in politics and he is able to bring about positive change and reform, he will be not only a role model for all African Americans, but it will help all minorities. If he becomes a failed president, like our outgoing president Bush, I fear that we may loose much ground and that tensions between races could befall us. It’s important to recognize this less we all fall victim of pundits and cynicism. Obama has the potential to draw many of the new generation into politics, social and public service and, grass roots movements. Obama may spur community involvement and activism the likes of which few presidents if any have been able to accomplish.

One profound thought comes to mind. No matter the outcome, no African American should ever feel they are a second class citizen. No African American should ever hold their head down because of their race. No African American should ever state, opportunity is less available to them because of their race than to any other member of our great nation. This election does not prove that racism is dead. Not at all. What I think it does show is that, it’s not as important as many of us have thought it to be. Race is not a barrier to success. It is not a glass ceiling. This should be truly inspiring to all of us who believe that this country is great, because we are all different.

Change In a Transitional Society

Obama’s win has many implications that are still as of yet unknown. And every indication is that only history will provide us insight. He did not win because he is African American. He won on Merits. Or did he? Is it possible to say he won simply because of the overwhelming dissatisfaction with President Bush? In part the answer has to be yes. Obama represents hope. He is young charismatic and vibrant and speaks to change. Specifically, is that change for the better? No one knows for sure just yet. But listen to the news and the profound implications of so many bailouts and failures. Listen to the grinding halt of a global economy and read the fine print and in between the lines of our global markets. The U.S. is a country in transition. If Obama can carry this country with his charisma, intellect, discipline and the very same grass roots, community organizing skills, we may well be onto something. We may well have a winning President for years to come. My intuitive guess is that Obama has the potential to understand and to use the psychological forces of leadership to guide this nation. But of course, as with all presidents, will he have the right cabinet and support.

The Opposition of Partisanship

Aside from the staggering issues we all face, Obama has before him the tempest of partisanship. Reading the NY Times today, already we have republican conservatives aiming to simply make Obama’s presidency a miserable one. It would appear that Newt Gingrich is the only one who has voiced concern over taking this position. Hurrah Mr. Gingrich. The country does not need division right now. We need leadership. The republican party would be better served to head the notice, voters have given and, find a way to move towards the middle and extend a hand to a President Elect that is well supported. I should also note that any potential backlash from partisanship bickering will go a long way towards drowning out the republican party from main street politics, and further away from the White House. After such a significant loss, the republican party must acquiesce to the will of the American people and simply plan for a fight another day. Mr. Gingrich, please tell our fellow republicans they have no clothes! It ain’t pretty either.

As Strong as the Roots

Anyone who enjoys plants will tell you that a plant is only as healthy as its roots. A tree is only as strong when the wind is howling as the roots are. Obama won this presidency by applying grass roots efforts and using skills of a community organizer. I would urge our new president to stick to his knitting as he develops his legacy. Be a president of the people, voted by the people, to serve your people. It would be a strategic mishap if Obama were to take on the Washington power structure head on. There really is no need to do so. I think Obama knows this. During his victory speech I was moved by his indication that he would need public support. Obama is a leader of concensus before judgment. If the elections is any indication, we should look at how he goes about winning his constituents to predict how he will faces the many challenges before him. In many ways he might well wind up being a Bill Clinton. President Clinton often tested the water and researched the polls before adopting any position. It assured him high marks as a sitting president. Although Obama’s presidency is much different in terms of the issues he faces, Obama I assume will do much of the same, with one difference. He will build and derive his power from the people through old fashion grass roots.

Winning The Presidency via Economic Anxiety

Winning the Presidency via Economic Anxiety
(By: Rene Velez 10/15/08)

These days no matter where you turn your head the talk of the town is how bad the economy is. Driving along the city of Miami you can almost feel the fearful pause of a normally bustling city. Where the culture is often over the top on glamour, fashion and in showing your achievements through acquisition, now everyone is simply watchful of the dark clouds above us. Even in the sunny subtropical days that are common in south Florida, the mood is that of a raining day.

Judging by the news of sour profits, tight credit markets, government bailouts and that all too ugly word recession, the mood is somber at best all through out the country. If it were not for the repeated interruptions of news flashes of the presidential elections, I think some people might just be ready to jump out windows. This gloomy mood makes me ponder on the effects of our current economic situation on the elections. Not that this is new but I have some of my own thoughts on the matter.

The Art of Expression in Saying Nothing

All in all I like Obama, but I am not convinced he is capable to meet all the challenges before us. He has attracted many citizens to his side by virtue of having a gifted tongue. He is eloquent, rhythmic and able to captivate the masses. He is so god at his oratory work, I am surprised that he has not been called the coming antichrist. Not because I think he is or should be viewed that way, but his presence is somewhat unnerving. Yet for all his skill he’s not offered anything any 4 year economics student at a decent college couldn’t conjure up. Like all presidents he lacks substance in what he says. His track record as a community organizer hardly is a training ground for world politics and for being the leader of the free world. His track record on taking positions on senate votes is lackluster, mainly because he took no definitive positions on crucial votes. Although it’s not uncommon for presidential candidates not to take hard positions while campaigning, as a measured way of staying out of controversy, nothing he has said compels me to vote for him over John McCain.

Popular Support in an Economic Downturn

Lets face it, in the words of Bill Clinton; “it’s the economy stupid”. There is but one key law of physics during an election year when the economy is sour. “ The greater the economic downturn, the greater the propensity of voters to want to switch parties, candidates and to repel the forces of the current administration”. Bad news for McCain and good news for Obama. But why is it that the media doesn’t really say that. My guess is that by saying that people want “change” only because the economy is bad , is like saying that Obama really isn’t qualified. My gut feeling tells me that this race would be a lot more heated and the polls would show a much tighter race if the economy provided a more even playing field.

President by Default

Obama might very well win this election, yet he will live with the fact that the peoples choice was not because he was the better candidate but, rather because people wanted change more than they wanted him. Although this may sound like an undignified way to win the presidency, few candidates would shun the chance to win. However, in those early months as he takes the reins of power and is thrust onto the enormous problems this country faces, his choices better be as good as his oratory skills. I fear that anything short may cost him dearly in the way of political clout. I am not forgetting that we will also likely have a democrat controlled congress. In fact I will go out on a limb and say it may not matter that the democrats control congress. Judging by past performances, the democrats have a way of dividing instead of conquering political agenda. The economy, war, energy, unemployment, inflation, trade deficits, budget deficits and the like will be more than any president has had to handle in a long time. AT least since F.D.R.

Voting with Anxiety

In my mind voters are likely to vote their anxiety. In fact Wall Street may well be experiencing the ebbs and flows of an investing public voting or I should say trading their fears and uneasiness on the future with Obama. The disparity in trading values from day to day for the past few weeks is a tell tale sign of a very uneasy country. Of course many economist will argue this point with me. I should add any economist could well argue the point well against me. But I will offer you this to ponder. A large part of business is about management. And management owes a great deal to psychology. Then logically, the state of mind of a country in economic fear is to vote your anxiety.

McCain’s Timing in History

McCain’s timing is not only off given his ties to the republican party, but he has not shown the diversity and energy that would be required to roll with the punches that have been dealt him. I truly believe as a senior senator of great experience he could have derailed Obama. At minimum he could have turned on a more formidable defense by bringing to light a more comprehensive solution to today’s problems. He did not, and perhaps, he could not. It would be overwhelmingly difficult to up the stakes preceding an election and to take positions that may be contrary to your own parties decisions. Especially, at a time when the country is in such turmoil. This is the equivalent of giving a stick for your opponent to hit you. Although his timing in history is way off, the truth be told nothing convinces me more of our need for change all around. We need change in leadership, and change ideally should come from outside the current established political leadership. This is a plus for Obama.

From the Outside In

Most of my professional life, as a business manager, I have had to contend with bringing about change in business. In order to bring about efficiency and effectiveness change is often required. I have learned through many years people fear change. Change is a difficult thing. Reinventing oneself is not easy. We are after all creatures of habit. It is experience that’s helps make change agents better at what they do. It is the ability to see beyond the current situation and make those finely executed adjustments, through careful decisions that make change agents great. Therein lies my indecision with Obama. But there too begins his promise. His new vision together with the fact that he is a very intelligent and skillful politician, does not preclude effectiveness as a president. To this regard Obama is empirically a leap of faith. That is to say his track history does not precede him. Considering peoples anxiety and overwhelming discontent with congress and the current president, the general population seems to be okay with that. The notion of change coming from the outside is not only palatable, it is welcomed and sought. Obama will win simply because he has a limited amount of exposure to the establishment.

The New Political Landscape

I propose to all that we have a new political landscape. Fear, terrorism, anxiety and poor political governess will promote change and new leadership from outside the established norms of American Government. This is a periless and an exciting time in American politics. The American people will speak out in historic numbers to promote change. If we as a nation can stay charged, then we stand to bring innovation to the way we govern our nation. There is risk however. What happens if the opportunity for change and innovation goes sour? What if this transition point in American politics is trampled because of a few bad decisions and some unanticipated mishaps? What then? Will we have hope? Will the public still support change and innovation? I trust the American Public will. Innovation is a part of the American way of life whether we realize it or not. However, the most palpable driver behind the new political landscape is that the stakes are so high.


In Obama we will trust, and fear not!

Critical Mass of a Bailout

The Critical Mass of a Bailout
(by: Rene Velez September 26th, 2008)

Here is a term that as of late has a double meaning. “Critical Mass”. In business the term is used often to describe the volume of business required to get attention, show up on the radar, or to have a significant impact upon others. Looking at the current scenario of the financial crisis you come to realize that AIG, Fannie Mae, Freddie Mac and the banking industry as a whole have a significant critical mass. The White House’s desire to bail out the economy legitimizes the importance of corporate Critical Mass. Yet you might say that the Critical Mass of corporate largess now has another Critical Mass to contend with. That is the Populous Critical Mass. This is defined as those citizens, and the public at large who’s opinions and views determine the outcome of how the Corporate Critical Mass should affect them and how government, in this instance should react.
For many years now I have been envisioning a social, political and economic revolt from the middle and lower class. Is the current economic fiasco a turning point? I don’t really know. Nonetheless the related nature of why the popular view that bailing out corporate America is filled with disgust, lends credence and support for the general discontent of the American people with big business and with our government.

The Next Shoe to Drop

Maybe we are just at a turning point. Maybe people are just now starting to react. Maybe this is just the tip of an iceberg that will lead to the type of calamity that precedes the great change America needs. If this is the beginning, what else will disrupt our national and global economy in the near future? My guess is the writing is already on the wall. The airlines and their future position due to expiring fuel contracts looks bleak. I suspect a continued rise in the cost of fuel and a downsized economy could just be the straw that breaks this important logistical network. The other industry which plays a vital role in our economy is the Auto industry. Here too, the news is not good either. With sagging car sales and a lack of innovative product to counteract the consumer demand for fuel efficiency and as well as functionality and style, has already proven to undermine the major auto manufactures in the US. Will these be the next corporate bail out candidates? Perhaps.

The Differences

As for the automotive industry, perhaps a bailout is not likely, at least not from the government sector. Despite saying this I know $25 billion has been promised already. However, This is mostly a stop gap measure in order to buy time and create new platforms for the NT American auto. Most likely the bailout will be from the private investment market. Why? I suspect because although a critical part of US logistics, (and the economy) there is a ready and available foreign market that will fill any potential void, with barely an immediate impact on the demand and supply side of economics. The airline industry might be another issue. Although the same might be said of the airline industry I believe that national security might play a role in saving the airline industry, but only if there are no takers for a bailout, from the private investment sector.

Socialized Capitalism

All of this bailout talk and the government’s need to apease the general public’s demand to either be paid back or to share in the upside of a turn around situation has bolstered talk of a Socialized form of American democracy. I might add that these views are well justified. But is that really bad? Maybe we could actually do this right and pay off our national debt? Maybe this is not so bad considering how bad things really are? The real issue is that socialism is a dirty word in American democracy. It should be! For me the real fear is that government can’t do anything right without it costing the taxpayers a fortune. So any possible upside is likely to be absorbed through bureaucracy. Here in Florida, after Hurricane Andrew, insurers suffered significant losses. So much so they stopped insuring homes. The demand and need was so great that the state had to step in and become the insurer of last resort. This worked out for a while although the state was not into it for profit. Other than stabilizing the market and allowing for a period of recuperation, the state and taxpayers did not benefit. As the years past private insurers came back into the market.

The Popular Critical Mass

Is it possible that the revolt I have been thinking about will be no revolt at all, but rather a fundamental change in how we manage this country and all the mission critical goals we have before us? The popular vote sees the need for change and that the old ways of doing business and government can not continue. In fact the old way of government is coming under attack heavily these days. Free markets do work, but with diminishing rewards to the lower and middle class. These are the constituents the government is supposed to protect. But, they (the government) do so poorly simply because this has been a fickle crowd to please when it comes to re-election. The real money and backing for a political candidate’s re-election comes from big business, lobbyist and political action committees. Lou Dobbs from CNN says it best, “the best government money can but”.

The Need for Leadership

Despite all of our current concerns of economy, foreign policy, healthcare, social security, education etc. etc., this is still a great nation and a great country. So much so every politician will take his or her turn selling you this point, all while they mismanage your government and make you appreciate it.

I don’t question American ingenuity! I don’t question American hard working families! I don’t question American resolve!!! Above all I don’t question America’s commitment to generosity when the time comes for a nation such as ours to help others in greater need. I have though, for many years, come to question greatly the leadership in America.

In corporate America, greed and short term planning geared for quick profits are bringing down our sustainability. Worse, these philosophies have created corruption in corporations across our country and are undermining the working public and this country. Corporate and ethical responsibility are in my opinion at their lowest. You are more likely to have a corporate citizen do something of social value these days if it has a great deal of impact and marketing value than simply because it’s the right thing to do.

In government, the political process of re-election and or guaranteeing yourself a soft landing by means of a corporate job after your years of service, means politician’s play up to big money and influence rather than their constituents. No one wants to take a hard line position simply, because it’s good for the people. The simple truth is that our politicians are not the leaders we want them to be nor are they the leaders they should be. You can’t afford to make any waves in politics. Sadly, even when politicians do well the general public ignores them rather than standing behind them and supporting them. In these cases we as a people get what we deserve.

How do we arrive at better leaders? Training, education both at the elementary level and in higher education. We need to instill pride in public service. We need a better way to grade our political and corporate leadership. Elections alone do not work. We need perhaps, an independent board of academicians that can (a) create national strategic objectives and (b) grade how well corporate America and government perform their respective roles, and issue reports to the people of this country. Depending on the overall score and determining factors; leaders are in the worst case replaced or simply given vectors for performance. What I see are boards for varying strategic industries and for sectors of government. Will this be perfect, no. But it will give us a chance to focus, direct, and be intelligently critical towards achieving overall objectives.

I should mention that these boards have to be totally independent, with no possibility for self enrichment in the future, no ties to those being judged. As an accountant I would liken it to the type of independence accountants must have when auditing except much more pure. The idea is to form a sterile and objective basis for analysis.

The Big Bailout Problem

The bailout as presented does nothing to protect the taxpayers. It transfers the risk and exposure to the taxpayers for years to come. It gives much, too much, power to the secretary of the treasury. (An appointee) It provides for no regulation that would provide protection for a recurrence of the fundamental problem in this crisis. It fundamentally insulates and protects the wealthy and irresponsible companies that have created this mess. It is a reaction geared towards addressing , if not playing to fear and initiated by panic.

Without question I don’t like this bailout, though I think it may have some positive benefits. But this may be minimal if any. This equates to high risk.

The more I toil with this scenario the more I say, NO BAILOUT!. Let the market fail and correct itself. Not on my hard earned taxpayer dime!

I may well hurt. My 401K, IRA’s and mutual funds will take a huge hit. My home value may continue a precipitous decline. Yet I rather take that risk than strap my children with additional debt. Give me a leadership I can count on and I might risk otherwise. But seeing what I see now in corporate America and in government……..no thanks!

The Critical Mass

I can’t help but feel the republican party is not acting in the public’s interest only. Although I welcome their rejection of the bailout, I do not for a moment think it is all about what is best for the American people, despite the turn out of the critical mass against the bill. The republicans seem to instinctively fear that Obama will win this election almost by default. If this be the case a political strategy for the republican party is to do better than average in this bailout proposal and hope that in 4 years the public will be convinced they were the better bet in 2008 and in 2012.

Now more than ever the critical mass has shown its muscle and power to influence political leaders (I use the term “leader” loosely). It is the critical mass that has shown up and that will dictate how government responds and who will win another term in office. Strength in numbers.

Citizens Show Up

No one can say for sure if we as citizens are crazy for not wanting this bailout. But I am proud and delighted to see so many write into the house and to their legislators about their contempt about how the government is handling this crisis, how they allowed it to happen, and asking for alternatives.

Yes alternatives exist. Some examples are (a) increase the FDIC insured limit to $250,000 or more. (b) take a direct capital (ownership) position in failing banks that guarantee an upside to taxpayers, (c ) provide for taxpayer relief and restructuring of overvalued homes with high mortgages and adjustable rate mortgages, (d) provide regulation of the banking industry to prevent future instances of overleveraged banks, (e) pass new laws to go back to the traditional borrowing requirements that evaluate the ability to repay debt, (f) require first time home owners to undergo credit training. (g) creating private equity vulture funds to buy out bad debts from banks at discount prices.

I for one would like to try instituting policy that is geared towards regaining the public’s trust in the banking and equity markets. The economy should follow and perhaps then citizens will show up for the political bipartisan group that has what it takes to assemble and get things done!

Bailing Out Corporate America

Bailing Out Corporate America
(by: Rene Velez Sept 24th, 2008)

I have been wanting to contribute my own thoughts on the recent events of bailing out corporate America. But first I have to get some things off my chest. This is truly embarrassing but not a surprise. The level of greed in this country has reached a new level. Not to be undone is the level of in-competency our government has shown and the absolute inability of regulatory agencies to function for the public good.

Recent events show clearly how management is willing to push the numbers of corporate America to prop up earnings under a business model that is little more than a house of cards. While at the same time meeting the objectives, however unfounded, and in this case insane, that lead to lucrative executive compensation packages and golden parachutes. Clearly, not only should these executives not receive what amounts to excess compensatory packages, but I would investigate and prosecute the executives and the board, who demonstrated reckless abandon for what is now economic terrorism.

Sarbanes Oxley, has done nothing as there is no mechanism to measure and to judge the magnitude of a failed business model in light of poor management. In the case of AIG the $85 billion bailout figure will surely cost more. To think this is an insurance company, an actuarial business, who can calculate that you could extend your life expectancy another 5 years by eating a brand muffin every morning. Yet despite sophisticated mathematical models that predict probability they fell drastically short, in fact claim they were totally unaware of, predicting their eventual demise and collapse.

To think that no one dared to think that the real estate market could tank from oversupply, despite warning signs that were everywhere. To think that no one dared to question a home that increase in value 55% in two years might suddenly fall in value. To think the government truly did not know that income levels for the average American were far behind the appreciated prices of housing, To think that no one thought that the shear volume of collateralized securities could suddenly tank due to a market correction in the real estate and the credit markets. That no one in the mortgage community ever stopped to think what would happen to all those “No Document” loans that were issued with no income verification and virtually no credit worthiness.
The reality is that the securitization of mortgages transfers the risk of performance of those loans, in this case, directly to the stock market. In effect the mortgage business became a game of musical chairs, where many were left without a chair. Whatever happened to the traditional banking and mortgage model where money was earned the old fashion way? What happened to the five “C” of credit? Credit Worthiness, Collateral, Character of Borrower, Credit Risk, Cash Flow to Repay? It seems that lending model is too difficult! Why bother when you can make a mint on volume transactions and a ready market to transfer risk. The old theory of the free market has gone astray, and we should hold regulators accountable for not seeing it. Our federal government is to blame as well. The shear size of this newly created market, together with unprecedented real estate values was a clear indicator for all. A free and self correcting market was thought to allocate capital from the capital markets based on ascertainable facts based on the five “C’s” of credit. Capital is best placed where the likelihood for success and repayment were deemed to be the best. This did not work in this fiasco. Simply put, capital simply followed those who could place it the fastest and they in turn made money from packaging and issuing securitized instruments as fast as they could. The fundamental basis for proper allocation of capital was totally ignored. This neo mortgage securitization model of the mellenium was ripe for a wall street collapse. A collapse that is being compared to the calamity of the great depression.

Although a government bailout is difficult to swallow, I must admit that at some level it must be done. I have heard many say, to hell with wall street let them suffer and pay the price. The truth is that this is not about wall street loosing a lot of golden eggs, but more so the shear magnitude of the problem indicates that the golden goose is in critical condition. In this case it is the same golden goose that provides the golden eggs for all of us. So we must have government intervention to save us all. However, we must be very careful. Bernanke and Paulson both have deceived the public by not coming out sooner with the bad news. It is difficult to discern if this was negligence, incompetence or complacency. Either way they should have been sounding the alarms many months if not a year or so ago. So, we should not be so ready to react simply because now they are sounding the alarm. Some have made this quick and irrational response to a crisis similar to how we made the mistake of invading Iraq. This crisis is with us now and will be despite any government intervention so I would venture on taking some time to think through how all this works out.

The Positive Correction

The truth be told, after a significant market correction, mortgage backed securities will flush through our economy. Let us not forget, despite overvalued properties and the cost of non performing loans, these securities are collateralized and some tangible value is still there. So the bottom may not be as grim as it could be. In fact if these non performing and securities are repackaged and properly analyzed, purchased at a significant discount and held by our government, taxpayers could stand to make a profit. All this while injecting liquidity into the financial system. The question is whether our government can in effect make that work efficiently. Having said that we should look for private equity funds as well as foreign markets to invest in this venture. We should leverage our global economy so we all benefit from this process and not absorb U.S. taxpayer funds.

Punishment

We must take corrective action to teach reckless management a lesson. Corporate America should not be let off the hook. I would be very disappointed, although not surprised, if those responsible were let off easy. Government officials and regulatory agencies deserve to be held to the same standard. No lucrative compensation packages. Seek damages from management and the board. Conviction if criminal intent was involved.

Regulation

We must learn from this, create a mechanism that prevents this from happening again. This mechanism must be designed so as not to be too costly or burdensome on our capital markets, Sarbanes Oxley, does not really work, did not work here and is too costly. We can not maintain a competitive capitalist economy and compete globally with these types of regulations. There are other ways to accomplish this. If only the accounting profession was more aggressive, innovative and dared to think out of the box. It’s time for the accounting profession to show what it can do rather than taking its cues from the corporate infrastructure and government beaurucrats.
Colleges and Universities need to institute more corporate governess and ethics courses. I know that to many this seems like trying to address a cancer by prescribing an aspirin. Yet what should be evident to all is that corporate America is lacking in the fundamental precepts of how to crate value and sustain shareholder worth through true and tried methods. We seem to have a whole culture of executives who’s greed and desire to obtain quick results together with the true stresses of managing large corporations have time again yielded severe consequences in the long term. The results of many of the major critical issues of today, have a fundamental tie to short term, shortsighted management and government.
We had an oil and energy crisis in 1974, we did not learn. We did not diversify energy sources. Our auto manufacturers did not compete effectively against the Japanese. We’ve known we have an immigration policy issue for many years, we have not fixed that. We have been talking about the environment and the effects of pollution for over 40 years, we have done nothing. Healthcare is not new either. Terrorism was in someone else’s back yard so we turned the other way.

Reinventing our Government

We need to create a system so that government works for the people. Currently it does not. Our political system is geared towards and for the benefit of those with the most economic power. Those who have the most lobbyists and are behind PAC’s are those that have a stronger voice then the ultimate voters. We simply can not wait any longer for the general public, to come up to speed on the issues in order to then create a force to move our political leaders. What we can do however to is to create a system of transparency in government by creating milestones to the issues that face our nation. Initially. The agenda is simple as we have at this moment in time quite a number of issues that need immediate attention. We need to create a timetable with specific and quantifiable performance measurement standards to move this country into the 21st century. Our system of government, our capital markets, our corporate governance and our position in a global economy are being managed based on industrial era concepts and models. This simply will not get us there. We need a JFK, man on the moon, style of timetable to kick this great nation into gear. Some of the critical areas:

(1) Energy independence by energy type and source diversification.
(2) Transportation sector innovation and technology.
(3) Global economic development and restructuring trade flows.
(4) Healthcare Reform. / National Healthcare System
(5) Social Security System Overhaul.
(6) Immigration Policy Enforcement and Repatriation.
(7) Federal Government Realignment based on Critical Path Initiatives
(8) Educational System Restructuring.

For those of you who have any doubts, China has become a formidable power because of some very simple factors:

(1) Focused National Initiatives (Timetable Effectiveness)
(2) Small, Unified and Nimble Power Structure. (Efficiency)
(3) Global Market Initiatives (Assimilation into large markets)
(4) Shear mass of population. (actual productivity / vritual)
I should note that although China has mostly unskilled labor, its workforce takes great national pride in the work they do. Reminds me of days past when Americans were more unified. We could learn from the Chinese.

The Bailout

Lets not create a bailout that leaves taxpayers holding debt. Lets create a profit sharing scenario that pays our federal government for the bailout. Forget free money. All bailout funds need to be repaid in some way shape or form.
We need to create a system to make sure what we buy, hold or acquire has determinable value and or risk. This should under no circumstances be a giveaway. The government should act like any white knight who does so with a profit motive and not just for the sake of keeping the company alive.


The Real Fiasco

The darkest side of all of this is that everyone involved is to blame. Consumers took out loans they knew they could not repay. Some homeowners became homeowners but did not have the resources or earning potential to acquire a home. A sad testament to the sheer demand for housing by the masses of the working poor. Yet businesses and institutions preyed on unknowledgeable consumers who were not educated enough of finance to make better decisions. A sad truth about the financial literacy of the people from the richest nation on earth. Our regulators failed to judge the magnitude of an unjustified new capital market through securitized mortgages. Insurers failed to recognize the magnitude of risk by taking large positions on real estate driven transactions. Our government, as usual, was asleep at the wheel and reactionary til the end. The only winners are those that timed their entry and exit at the right time, and with barely a contribution to the production of tangible wealth.